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Chinese stainless steel futures dropped on Wednesday, after opening more than 7% higher, as cautious investors assessed the uncertainties caused by surging prices of raw material nickel.
The most-active stainless steel contract on the Shanghai Futures Exchange, for April delivery, dropped as much as 4.2% to 20,655 yuan ($3,270.11) a tonne, after hitting 24,785 yuan per tonne earlier during the session. The contract closed down 2.3%.
“Current stainless steel prices have deprived from its own supply and demand fundamentals,” said Fu Zhiwen, analyst with Huatai Futures.
Fu also added that once the nickel turmoil on the London Metal Exchange (LME) comes to an end, stainless steel prices could drop back within reasonable range.
The LME was forced to halt nickel trading after prices more than doubled to over $100,000 per tonne on Tuesday. Shanghai nickel contract hit a trading limit of 17% on Wednesday.
All other steel products on the Shanghai bourse fell. Steel rebar, for May delivery, dipped 1.5% to 4,907 yuan a tonne and hot rolled coils used in the manufacturing sector slipped 2.2% to 5,121 yuan per tonne.
Data from China’s statistics bureau showed that the country’s factory inflation in February eased to the slowest annual pace in eight months, but a pick-up in coming months is expected on rising global commodity prices.
Coking coal futures on the Dalian Commodity Exchange rose 1.3% to 3,106 yuan a tonne and coke prices edged up 0.4% to 3,771 yuan per tonne.
Benchmark iron ore futures DCIOcv1 dropped 3.9% to 813 yuan a tonne, tracking spot 62% iron ore which slid $2.5 to $160.5 per tonne on Tuesday, according to SteelHome consultancy.